Strong hand and no impunity. That is the message that prevails in the US authorities in relation to the incipient financial crisis that has claimed the fall of Silicon Valley Bank and two other entities last week. After the president of the United States himself, Joe Biden, launched this Monday the message that responsibilities had to be demanded, the Department of Justice and the Securities and Exchange Commission (the SEC), have opened investigations to clarify what happened, according to published by the US media.
“We have to get the full explanation of what happened and hold those responsible accountable,” Biden said Monday. “No one is above the law,” added the president. For Biden, the fall of Silicon Valley Bank (along with those of Silvergate and Signature Bank) is a litmus test. The authorities have to manage to prevent contagion and the financial crisis from spreading, but without the support measures arousing the indignation of citizens, as happened after the 2008 financial crisis.
For this reason, Biden has drawn some red lines that he will try not to cross. Taxpayers will not have to take losses, he said twice on Monday, but the sector will pay the cost of bailouts and support measures, he explained. In addition, although depositors are bailed out, investors (shareholders and bondholders) will not be protected, who will lose their money: “This is capitalism,” Biden said. Along with this, the managers of the intervened entities have been replaced.
But in addition, the Department of Justice and the rest of the authorities will investigate whether there have been irregularities that have caused the fall of Silicon Valley Bank, the largest of the banks that have gone bankrupt, according to advance The Wall Street Journal and then published various media.
There has been no official announcement about the opening of these investigations, which are still in the preliminary phase. The authorities examining whether there was misconduct on the part of the executives and in particular whether the sales of bank shares by the executives complied with the regulations.
Although the cited sources do not identify who is being investigated, the bank’s chairman and CEO, Greg Becker, and chief financial officer, Daniel Beck, sold shares in the group in the week before the SVB collapsed, bringing those operations under the magnifying glass of the supervisors. Becker made $2.3 million from the operations, though according to his official communication, He held the bulk of his shares when the bank went bankrupt, so he has suffered heavy losses. Beck earned just under $600,000 from his sales. In both cases, the sales were made through a pre-announced executive stock sale program, which they filed with the SEC a month earlier. These deferred operations with prior announcement were regulated precisely to avoid suspicions of use of privileged information, but they have been the subject of criticism and have now been reformed so that the notice has to be three months.
The investigations are being carried out by prosecutors from the Justice Department’s fraud section, the US Attorney’s Office for the Northern District of California and the Securities and Exchange Commission, a source who requested anonymity told Bloomberg. So far no one at the bank has been accused of wrongdoing and the investigation could end without charges being filed.
On Sunday night, SEC Chairman Gary Gensler said the agency is “particularly focused on monitoring market stability and identifying and prosecuting any form of misconduct” that could harm investors or the markets, without Name any specific company.
Congresswoman Elizabeth Warren has called for the directors of the bankrupt entity to have their bonuses returned. Greg Becker earned $9.9 million in 2022, virtually the same as the year before, according to the information registered by the entity with the SEC. Dan Beck, for his part, had 3.6 million in compensation.
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